a. WTI Crude Oil sells for 39.12. The one year interest rate is 2%. Assume that crude
Question:
a. WTI Crude Oil sells for 39.12. The one year interest rate is 2%. Assume that crude oil carrying costs are 0.5% and the convenience yield is 0.5%. What is the one-year futures price for WTI Crude Oil?
b. The current USD/CAD exchange rate is 0.76, i.e. 0.76 USD can be exchanged for 1 CAD. If the six month Canadian interest rate is 0.5% and the US six-month interest rate is 0.7%, what is the 6 month USD/CAD futures price?
c. The March 2021 Corn Futures price is 396.0 cents/bushel. Assume that the March interest rate is 0.5% and that the spot price of corn today, today being Oct 27, 2020, is 393.0 cents/bushel. Can you tell using the data given, whether the futures price is too low or too high? If you cannot tell, explain why.
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker